adminSamuel Oakford and Kayla Ruble
Two months before the Ebola virus crossed over the border from neighbouring Guinea, UN Secretary General Ban Ki-Moon described Sierra Leone as “an inspiring experience for international peace-building efforts.” The country, ravaged by a civil war that spanned the 1990s and early 2000s, was seemingly on track for economic growth and social stability. But in the seven months since the deadly haemorrhagic fever took hold there this May – infecting more than 7,800 people in the worst outbreak of the disease since it was discovered more than 40 years ago – the West African country’s economy, along with its health system and social framework, has been devastated.
“The shock has basically placed a blockade in the country’s journey to prosperity,” Sierra Leone’s Minister of Finance and Economic Development Kaifala Marah wrote in an October assessment of Ebola’s economic and social impact on the country. Marah noted that a United Nations’ assistance program, as well as plans from other multilateral partners for 2015, “have been derailed.”
Sierra Leone is not unique in the economic impact felt from Ebola – Guinea and Liberia have seen nearly identical effects. Growth projections for 2014 have been lowered across the board in the countries and a total income loss of more than $2 billion is expected between this year and next, according to the most recent projections from the World Bank.
The three governments have been forced to boost spending and cut investments – largely kept above water by the hundreds of millions of dollars in foreign aid funnelling through organizations like the World Bank, the World Health Organisation, and individual country donations.
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At the November G20 summit in Brisbane, leaders unveiled plans for a $300 million package that the International Monetary Fund (IMF) said it would pledge to the region. This move followed $130 million in loans that the IMF extended to Sierra Leone, Guinea, and Liberia in September. Details of the larger package – a mix of grants, debt relief, and loans – likely won’t be announced until at least January.
As the countries prepare their budgets for the coming year, experts say the pending IMF package is crucial to their fiscal viability in the coming years. Unlike money directed through NGOs, the IMF package would be a direct infusion into state coffers and help finance day to day government services.
“We are just making a plea to them, given the effects of Ebola,” Moses Sichei, the UN Development Program’s senior economic adviser in Sierra Leone, told VICE News when discussing the package.
Though small totals by international standards, the three countries already owe creditors $3,6 billion, including $464 million to the IMF. Despite slashing their own budgets in the face of falling tax revenues, Liberia and Sierra Leone will have paid the IMF more than $14 million for existing loans by the end of 2014 – money that could otherwise have been spent on their public health systems, already in poor shape before they faced the Ebola virus.
US Treasury Secretary Jack Lew has pushed for at least $100 million of the total to consist of debt relief and grants drawn from excess emergency funding left after the 2010 Haitian earthquake.
A Treasury spokesperson told VICE News the debt relief proposal would wipe out payments on IMF loans over the next several years.
Sources close to the talks say it is likely the remainder of the package will be further debt. Though the loans are likely to be “concessional,” with interest rates and terms far more generous than what the market would ask for, activists say the three countries – among the poorest in Africa – should not be saddled with any more debt.
“We’re happy with any debt relief that’s given, but we don’t think they should be given more loans,” Tim Jones, policy officer at Jubilee Debt Campaign UK, told VICE News. “That will once again restrict the spending they will have, which is one of the problems with this crisis.”
Jones pointed out the language used – “aid” – is a misnomer, since the bulk of the package will only pile further debt on the countries.
Existing IMF loans to the region, while less draconian in their impositions than in decades past, still focus on conservative monetary policy and holding down interest rates – a philosophy than can lead to cuts in public sector spending. The IMF maintains this has not happened in the developed world.
Shortly after the November G20 announcement, the Global Alliance of Mayors and Leaders from Africa and of African Descent (GAMLAAD) – a coalition with members from over 80 countries – requested that the IMF, as well as the World Bank, cancel all debts on their books for Guinea, Liberia and Sierra Leone.
“This humanitarian gesture will sincerely express the world’s most committed relief to the people of the worst affected countries,”said Alfred Okoe Vanderpuije, president of GAMLAAD.
It appears, however, that when the new IMF package comes into effect, the three countries will have more debt, not less.
The most recent IMF debt sustainability analysis for all three countries was conducted in 2013, finding risk of debt distress was moderate for Sierra Leone and Guinea, and low for Liberia. That assessment was carried out before the outbreak began, and since then, Sichei said, the situation has changed and needs to be reevaluated.
The IMF loans are not expected to push the countries toward default, but when the bulk of payments begin to come due around 2020, governments may be faced with a choice between loan instalments and vital domestic spending – just as they have been during the Ebola crisis.
Mark Thomas, a lead author of the World Bank’s report on the economic impact of the 2014 Ebola epidemic, told VICE News that to tackle the outbreak countries have had to increase current spending. Upped outlays can include buying supplies or creating new jobs, and even setting up treatment units – although much of this has been covered through international donors and partnerships.
As a result, governments are seeing a shift from capital spending like infrastructure projects — crucial for growth — and an increase in current spending towards health and social areas. This comes at a time when revenues are declining. Sierra Leone, for example, has seen revenues drop $85 million, while spending is up by $43 million, according to World Bank figures.
An estimated 100 000 people still die every year in the region from malaria, a preventable and treatable disease — and experts say that number could quadruple in the coming year as patients shun clinics out of fear of contracting Ebola.
“Nobody knows how long this outbreak is going to last or how much of an impact it will have,” Laura Miller, an Ebola response coordinator with the International Rescue Committee in Sierra Leone, told VICE News. But, she noted, “Ebola will constitute only a small number of overall deaths in the country.”
According to Miller a majority of the deaths will be women — during pregnancy, while giving birth, or in post-natal phase — and children, worsening already grim figures. Prior to the outbreak, Sierra Leone was the third worst country for maternal health, and one in six children died before reaching 5 years of age.
“Ebola is coming on top of weakened infrastructure from civil wars that were fueled by international relationships and resource extraction,” Boyce told VICE News.
“I think the international community has real responsibility in doing something about Ebola and the impoverishment more generally in these countries.” – Vice.com
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